Great Lakes Wire

Last week, the U.S. Department of Labor (DOL) announced a shift in its approach to determining independent contractor status. The department will cease enforcing Biden-era regulations and revert to a standard set in 2008. The previous rule outlined six criteria for determining independent contractor status, making it more challenging to classify workers as independent contractors.

The 2008 standard comprises seven criteria: whether the work is integral to the company’s business, the duration of the working relationship, worker investment in facilities and equipment, company control level, potential for profit or loss from work performed, worker judgment and initiative over their work, and the level of independent organization and operation by the contractor.

With this reconsideration by the DOL, related lawsuits in various courts have been paused. At the state level, some states are also revisiting independent contractor status issues. California's AB5 law had significantly impacted jobs by redefining employment status until it was amended due to its broad implications.

Michigan is now considering similar legislation with Senate bills 6 and 7 adopting an "ABC test" akin to California's AB5. These bills could affect Michigan small businesses similarly if passed into law. They also propose public wage disclosure mandates and felony penalties for misclassification violations.

The Small Business Association of Michigan (SBAM) opposes these bills, citing Michigan's self-employment growth compared to California's decline post-AB5 enactment. Currently under review by Michigan’s Senate Labor Committee, these bills face opposition from a pro-business Republican majority in the House.

The debate on independent contractor status sees Democrats and unions advocating for employee protections against perceived exploitation while arguing that established businesses should handle tax responsibilities. Conversely, independent contractors prefer autonomy without employer constraints. Businesses favor flexibility in engaging workers as needed without incurring employment costs.

Nationally, over 65 million people are self-employed in the U.S., with ongoing regulatory efforts seen as attempts to exert more control over their work choices.

By Michael Burns